A. What is Alpha One's NOPAT? Why does NOPAT differ from the earnings after taxes? B. Estimate
Question:
A. What is Alpha One's NOPAT? Why does NOPAT differ from the earnings after taxes?
B. Estimate the effective before-tax cost of the long-term debt.
C. Estimate the effective after-tax cost of the bank loan and the long-term debt.
D. Estimate the cost of common equity capital.
E. Determine the financial structure weights for the two interest-bearing debt components and the common equity.
F. What is Alpha One's WACC?
G. Determine the dollar cost of financial capital used.
H. Estimate EVA. Did Alpha One build or destroy economic value in 2013?
Alpha One Software Corporation
Income Statement 2013
Net Sales $1,500,000
Cost of Goods Sold -850,000
Gross Profit 650,000
General & Administrative Expenses -250,000
Marketing -206,000
Depreciation -50,000
Earnings Before Interest and Taxes 144,000
Interest -84,000
Earnings Before Taxes 60,000
Income Taxes (@ 40% rate) -24,000
Earnings After Taxes 36,000
Dividends 0
Retained Earnings for the year $36,000
Alpha One Software Corporation
(Balance Sheet) 2013
Cash $20,000
Accounts Receivable 250,000
Inventories 350,000
Total Current Assets 620,000
Non-current Assets, Net Book Value 480,000
Total Assets $1,100,000
Accounts Payable 125,000
Accrued Liabilities 125,000
Notes Payable (bank loan repayable) 100,000
Total Current Liabilities 350,000
Long-Term Debt 500,000
Common Stock (20,000 shares) 100,000
Retained Earnings 150,000
Total Liabilities & Equity $1,100,000